Bank of America, CARD Act, Dodd-Frank, and soaking the poor.

Bank of America will start charging debit-card users $5 a month to pay for purchases. The move comes as the cards increasingly replace cash and as banks look for ways to offset the loss of revenue from a new rule that will limit how much they can collect from merchants.

Via Instapundit. You see, what happened here is that Senator Dick Durbin took a break from throwing minority kids out of private schools to extend his legislative magic to the field of merchant debit card fees. The plan? Force the banks to give up their greedy, greedy profits by limiting merchant-to-bank transaction fees, thus saving the merchants money, which they would then pass along to the customer in the form of lower prices. Which sounded… actually, it sounded stupid in theory, even then. It sounds really stupid now because Durbin and the rest of Team Jackass didn’t consider the possibility that their Congressional mishandling of the economy from 2007 to [2010] might have resulted in a poor economy in 2011. So what happened? Well, the banks still need the revenue – because of the economy – so they’re going to raise debit card fees to make up for it. And the retailers aren’t doing much better – because of the economy – so they’re not racing to lower their retail prices. Assuming that they do it at all. End result? Your monthly expenses are probably about to go up. Hope you have a job! …Oh. Right.

The worst result of this new rule may be that it will specifically harm lower- and middle-income Americans. Think about who banks will force to pay for checking now. A bank has two customers: one with a high income that carries a few thousand dollars in her checking account and another with lower income who carries a few hundred in his checking account. It would value more deposits, so it will charge the lower income individual a larger checking account service fee.

Indeed, we see this already. Some banks offer free checking accounts if a minimum balance is maintained. So the wealthier person who can afford to keep a larger balance will continue to enjoy free checking, while a less affluent person who basically lives from paycheck to paycheck will have to pay. Before, neither faced a direct fee for their checking.

Double oops. And before anybody says that this is unexpected… no. No, it was not. I was telling people back in JANUARY that this was going to happen, and I even explained why:

What’s going on? Well, it’s a handy primer in why government interference in markets is something not to be entered into lightly. For the last few years Congress was run by the political party whose members are just ever-so-slightly more willing to believe in conspiracy theories about the evil, evil big banking industry and its quiet plan to turn us all into techno-serfs*. When times are good, this isn’t that much of a problem; when times are bad, though… well, that’s when the Democrats’ economic paranoia can bubble up, and the results ain’t always pretty. And so it was in this case. Regulating an industry – and banking is an industry – needs to be done dispassionately if it’s to be done at all; if you want to go in and punish groups, you end up being sloppy. The CARD Act and Dodd/Frank were both punitive bills dressed up as ‘reform:’ so it’s not surprising that the laws’ immediate targets are not going to reform. Predictable, in fact.

…Unless you’re a Democratic legislator, at least. It must be nice to not have a long-term memory: every morning’s sunrise is a new wonder, and the shame felt with every failure at basic math is swiftly drowned out by the ever-flowing river of Now. A shame that we have to live in the country that these amnesiacs are currently trusted with running, alas…